Boomerang Patients to Penalize Hospitals Under U.S. Law

Tenet Healthcare Corp., the third- largest U.S. hospital chain, keeps an eye on Medicare patients after they’re released. This isn’t just about professional integrity. Tenet has a financial stake in their well-being.

Fines are being levied against hospitals with high rates of patient readmissions under a provision of the Affordable Care Act targeting $8 billion in Medicare cost savings within six years. That has hospitals across the country going the extra mile to prevent the return of these boomerang patients. Tenet gets in touch with former patients after they’ve been released, urging them to keep doctor appointments. It also provides free medicine to some patients who can’t afford prescriptions and contacts pharmacies to make sure pills are ready for pick-up.

Still, many hospital administrators warn there is only so much their organizations can do once patients leave. That’s especially true at hospitals that treat the sick and indigent in poor areas.

“You could and should expect hospitals to do more than we have, but we can’t fix a broken infrastructure in a community,” said Nancy Foster, vice president of quality and patient safety policy at the American Hospital Association, the industry’s main lobby group, in a telephone interview.

Photographer: Erik S. Lesser/Bloomberg

Tenet Healthcare's Atlanta Medical Center stands in Georgia. Close

Tenet Healthcare's Atlanta Medical Center stands in Georgia.

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Photographer: Erik S. Lesser/Bloomberg

Tenet Healthcare's Atlanta Medical Center stands in Georgia.

Almost 1 in 5 Medicare patients hospitalized in the U.S. are readmitted within a month of their release, adding to hospital costs that grew to $17.5 billion in 2010, according to the Centers for Medicare and Medicaid Services, known as CMS.

Potential Penalties

Under the health-care law, hospitals with a high number of readmissions within 30 days can lose as much as 1 percent of their Medicare payout for fiscal 2013 and 3 percent in 2015. The program, which started with discharges beginning Oct. 1, focuses on Medicare patients suffering from heart failure, heart attack and pneumonia.

The penalties may cost the industry $280 million this year, according to an August report by Medicare, the U.S. health plan for the elderly and disabled. Average fines for a hospital with a penalty is about $125,000, according to September report from the Medicare Payment Advisory Commission, which advises Congress. About 67 percent of hospitals will be penalized.

For the for-profit hospital chains that often serve more affluent neighborhoods, the penalties will have varying effect. Only about 2 percent of the 162 hospitals owned by Nashville, Tennessee-based HCA Holdings Inc., the largest for-profit U.S. chain, could face fines this year, according to CMS data. Dallas-based Tenet may face fines at about 4 percent of its 49 hospitals.

Changing Mindset

Kelvin Baggett, Tenet’s chief medical officer, said his company is up to the challenge.

“This is a philosophical shift,” he said. “There has to be a recognition that some patients will return to our doors where we could have done something differently.”

Chains that serve rural and other more modest areas may face stiffer penalties. One of those chains is LifePoint Hospitals Inc., with about 24 percent of its more than 50 hospitals facing penalties, according to the CMS data.

The Brentwood, Tennessee-based company, with hospitals in about 60 mostly rural communities, is working to reduce readmissions by 20 percent, said Mary Margaret Huizinga, vice president of quality, said in a telephone interview.

LifePoint is teaming with nursing facilities, churches and community groups to help ensure patients receive the care they need when they go home. In some cases, that may mean having a church group go to a patient’s house to check on them during the day. In some communities where such services don’t exist, LifePoint has opened their own home health agencies or started programs to provide the care, Huizinga said.

Teaching Hospitals

Tenet fell less than 1 percent to $39.56 at the close in New York. The shares have gained 73 percent in the past 12 months. LifePoint fell less than 1 percent to $43.79 and has risen 6.4 percent in the past 12 months. HCA dropped 1.5 percent to $36.66 and has increased 32 percent in the past 12 months.

Teaching hospitals and nonprofits serving the poor, who are more likely to have serious ailments, may fare the worst under the provision.

“This is a significant penalty. Hospitals with thin margins may have to lay off staff, or curtail other health-care activities,” Foster, of the hospital association, said.

Hospitals that deal with poorer patients have higher readmissions because the population may lack access to transportation to see doctors or have a hard time finding a primary care doctor. They may have more trouble paying for their medications, leading to readmissions, or be less likely to follow special diets required of those with heart problems.

Broken Hips

Teaching hospitals that handle especially challenging cases may also get hit under the law’s readmission provision, said Catherine Keating, chief of regional hospitals medical affairs at the Cleveland Clinic in Ohio.

“We don’t want to penalize hospitals for taking the riskiest or sickest patients. And we don’t want hospitals to feel they have to shuttle patients off to another center,” Keating said.

In a research letter last month in the Journal of the American Medical Association, Karen Joynt, a cardiologist at Boston-based Brigham and Women’s Hospital, wrote that 7 in 10 hospitals face Medicare payment cuts under the law, with “safety-net” and teaching facilities hardest hit. The study reviewed records for 3,282 U.S. hospitals and medical centers.

The fines would be imposed even though readmissions often occur for reasons beyond a hospital’s control, she said in a telephone interview.

“If I have a pneumonia patient and they break their hip, I’m sorry, but should the hospital be penalized?” Joynt asked.

Arbitrary Timeline

Many doctors, while all for reducing readmissions whenever possible, tend to oppose the penalties on medical and ethical grounds. Ashish Jha, a doctor at Boston’s Harvard School of Public Health, said he recently let a pneumonia patient leave to spend a weekend with his son, who was home from serving in the U.S. Army in Afghanistan. Doctors should be able to make such decisions even when they know a patient may need to be readmitted without worrying about readmission scores, he said.

“When policy makers intervene, they have to think about all the implications,” Jha said by telephone. “There is something so arbitrary about 30 days.”

To contact the reporter on this story: Stephanie Armour in Washington at sarmour@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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